When Must a Business File an Unclaimed Property Report With the State?

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Businesses generally must file an unclaimed property report when they hold money or other property that has remained unclaimed beyond the dormancy period established by the applicable state.

That obligation can arise from something as ordinary as an uncashed payroll check, vendor payment or customer credit balance. Because the rules vary by state and property type, businesses operating across multiple jurisdictions need to determine where property must be reported, when it becomes reportable and what steps must occur before filing.

What Is Unclaimed Property and Why Do States Require Businesses to Report It?

Unclaimed property generally consists of money or other assets a business owes to another person but has been unable to return. Common examples include uncashed payroll and accounts payable checks, customer credits, dormant bank accounts, securities, insurance proceeds and certain deposits.

Once the applicable requirements are met, the business holding the property, known as the holder, transfers it to the state through a process commonly called escheatment. The state then holds the property for its rightful owner. Businesses may have responsibilities across 54 U.S. jurisdictions: all 50 states, Washington, D.C., Guam, Puerto Rico and the U.S. Virgin Islands.

What Is the Dormancy Period and When Does It Start Running?

The dormancy period is the amount of time property may remain inactive or unclaimed before it becomes reportable to a state. The period generally begins based on the last activity, payment date, owner contact or other event specified by state law.

There is no single national dormancy period. Payroll liabilities commonly have a one-year period, while many other property types use three- or five-year periods. For example, National Association of Unclaimed Property Administrators (NAUPA) currently lists checking-account dormancy periods of three years in California and Texas and five years in Georgia and Virginia. Businesses therefore need to evaluate both the property type and the applicable jurisdiction.

How Does the Reporting Process Work and What Deadlines Apply?

Unclaimed property reporting generally begins by identifying aged liabilities and determining whether each item has reached its state-specific dormancy period. Businesses should review payroll, accounts payable, accounts receivable credit balances and other potential liabilities, then determine which state has jurisdiction.

Before reporting, states generally require an attempt to locate the owner. NAUPA describes the basic process as identifying dormant property, attempting to contact the owner and, if unsuccessful, reporting the property to the state. Due diligence notices are often required 30 to 120 days before reporting. Most jurisdictions have fall deadlines around October 31 or November 1, although spring and summer deadlines also exist.

What Happens When a Business Fails to File or Misses a Deadline?

Late or missing reports can result in interest, penalties and expanded state scrutiny. California, for example, generally imposes 12% annual interest on property not timely reported, paid or delivered, and state law permits additional fines for certain willful failures.

A multistate unclaimed property audit can reach much further. State examinations may involve multiple property types and jurisdictions, extensive transaction testing and estimation when historical records are unavailable. Lookback periods can extend 15 years, while complex audits may last two to seven years or longer. This is particularly important because unclaimed property operates separately from tax concepts such as the Assessment Statute Expiration Date (ASED) or filing obligations for State Gross Receipts Taxes.

How Should Businesses Build a Defensible Unclaimed Property Compliance Program?

A defensible program starts with an inventory of potential property types across payroll, accounts payable, customer accounts, treasury, benefits, acquisitions and other systems. The business should then map each property type to applicable state dormancy periods, establish procedures for owner outreach, document due diligence and maintain a state-by-state filing calendar.

Record retention also matters. Businesses should preserve the information needed to establish owner addresses, transaction dates, owner contact and prior filings, particularly because state examinations can reach years into the past. Finally, compliance should be reviewed annually as state laws, administrative guidance, digital asset rules and filing requirements continue to change.

How BT Can Help

For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Bennett Thrasher’s Business Tax Practice or call us at 770.396.2200.

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